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US start-up puts a new spin on ERP outsourcing over the Internet

by John Geralds in Silicon Valley

A US start-up is putting a new spin on the booming "managed applications over the Internet" market to provide small to medium sized business with access to enterprise resource planning software.

As a result, Agillon does not plan to "rent" packages that have so far been aimed at Global 2000 organisations, but intends to supply users with tailor-made, less-complex offerings.

The Austin, Texas-based company is the brainchild of two industry veterans, who are using seed money from venture capital companies that they run to fund the new company.

Agillon?s chairman is Frank Moss, former chairman of IBM?s Tivoli Systems, while Steve Papermaster, founder of systems integrator BSG, is chief executive. BSG was sold to a competitor Medaphis in 1996 for $350 million.

Moss said: "Agillon's solutions will provide the key functions and features of larger, more complex applications without the lengthy implementation hassles, support costs, and steep learning curves that smaller companies cannot afford. Our objective is to make the entire experience - including the notoriously intricate job of implementation - revolutionarily simple."

However, Agillon?s strategy differs from that of rival US startup, Usinternetworking (Usi), which wants mid-sized companies to completely outsource applications over the Internet (VNU Newswire October 6). It has established relationships with a number of software vendors including PeopleSoft for financial management and human resources applications.

Agillon plans to partner with existing software developers that focus on the small to midsize market, and hopes to have front office systems ready by next year. Customers will also be charged for their applications on an incremental basis and the larger their revenues grow, the more they will pay.

Investment bank Hambrecht & Quist (H&Q) reckons that the midsize market is a lucrative one, with more than 500,000 companies in the US alone, generating between $10-500 million.

Cristina Morgan, a managing director at H&Q, said: "Small and medium-size businesses are the great untapped Internet market. To date, enterprise software vendors have ignored them because they could not afford the six- and seven-digit price tags of high-end solutions. By using the Internet to bring strategic business tools to the middle-market at their own level, Agillon can acquire not only their loyalty but also a vast revenue source in return."